No growth better than growth
Yes, it sounds contradictory. Growth is the essence of our economy and the vital ingredient to the good life we are having. How can no growth be better than growth? The old mature economies are flowing along with lower growth rate but maintaining a high quality of life. We have experienced many years of high growth and the quality of our life has improved by leaps and bounds. The thing is that we are now witnessing diminishing returns from our growth. In fact, while the rich are getting richer and enjoying real growth, the middle income and lower are not getting better, and many are not enjoying any real growth or bettering their living condition, despite good economic growth. A simple illustration, if economy grows by 5% and income grows by the same amount, broadly speaking, the people should enjoy a 5% growth in their disposable income or spending power. Or at least they should be slightly easier in their pockets. But not everyone got a 5% increase if the economy goes up by 5%. Yes, some got 10% or more increases. That’s why some are doing very well and very happy. Another problem is that the inflation beast that we have today is eating away everything. If inflation is 5%, everyone is back at status quo. If inflation is double or more, though the economy looks good, though the income goes a bit higher, there is really a net contraction in the spending power. It is negative growth to those whose income does not keep pace with inflation. On the other extreme, low economic growth with low inflation could be better when inflation is lower than economic growth and income growth. How much of our growth has been translated to the wealth of our people in the middle and lower income bracket? Are they really better off, sharing the growing economic pie, or are they starting to feel the strains in their pockets? A $100k increase in property price means many will have to work 5 to 10 years for nothing, not improving their income at all. This goes to the prices of cars, of high medical bills and other big ticket items. The couple of hundred dollars of salary increases are easily eaten up by the high cost of living of everything, from basic necessities, transportation, food on the table, and consumer durables. We may be in a situation when no growth or low growth is better off than high growth if the standard and cost of living can be maintained. At the rate inflation is eating up everyone’s income and savings, we should think carefully of chasing high economic growth for its sake. It could be an effort in vain. What is important is real improvement in standard of living, cost of living, not fictitious dollar increases when the value is depreciating by the days.